Calling all Franchisors! New Disclosure Documents required from 1 November 2021

The changes that relate to disclosure documents apply to any and all disclosure documents given on or after 1 November 2021

In our article (found here) dated 26 July 2021, we summarised some of the recent key changes to the Franchising Code of Conduct which attempts to adjust the balance of power in favour of franchisees via:

• increasing disclosure obligations;
• extending cooling off periods;
• strengthening franchisee early-termination proposals;
• requiring notice of franchisor special-circumstance terminations; and
• increasing franchisee dispute resolution avenues (and allowing multi-party franchisees to same).

Disclosure Obligations

We remind readers that the disclosure amendments include requiring franchisors to provide prospective franchisees with:

1. A current version of the updated Information Statement (found here);
2. A completed, current version of the new Key Facts Sheet (found here) which is effectively a summary of the Disclosure Document;
3. A completed, current version of an updated Disclosure Document including franchisee dispute history, rebate details, significant capital expenditure details, restraint of trade obligations, earnings information, and any attachments; and
4. Copies and/or summaries of relevant leases.

Additional Details

Now that the disclosure amendments have taken effect, it is timely to provide additional details of some of the amendments relating to same:

1. The Information Statement must be provided to prospective franchisees prior to other disclosure documents;
2. The Key Facts Sheet, intended to draw particular attention to the most crucial information in the Disclosure Document, was updated on 26 August 2021;
3. The Disclosure Document must draw particular attention to the Key Facts Sheet. The ACCC’s model Disclosure Document (found here) is being updated; and
4. A current version of the updated Code (found here) must accompany disclosure documents.

Timeframes

Franchisors must give disclosure documents to prospective franchisees at least 14 days before entering a franchise agreement or making a non-refundable payment (failing which penalties apply).

Should parties enter a franchise agreement, readers are reminded that the cooling off period has been extended from 7 to 14 days.

Recommendations

We continue to recommend:

• franchisors look to implement changes into their practice and update relevant materials; and
• franchisees familiarise themselves with their new rights.

If you have any questions about how the changes to the Code affect you or your franchise agreement, contact Gavin Parsons and Associates on (02) 9262 4471.